|
|
|
| Industrial Revolution, Financial Revolution, and Systemic Risk Governance |
| CHEN Yulu
|
| The People's Bank of China |
|
|
|
Abstract This article studies the relationship among industrial revolution, financial revolution, and systemic risk governance by examining the three industrial revolutions in human history. The three industrial revolutions had significantly improved productivity, transformed industrial production and social relations. The advanced technology innovations and applications, transformation of economic structure and evolution of social environments promoted development and upgrading of the financial sector. Subsequently, rapid capital accumulation and effective intermediation were essential in turning technological progress into industrial revolution, and financial revolution became an important catalyst of industrial revolution. However, if the rules, institutional arrangements and regulations could not catch up with the revolution in financial sector, the imbalances will build up and systemic risks accmulate, which would in turn trigger finanical crisis that would subsequently prompt major changes in the financial and regulatory systems.
The first industrial revolution established production process mechanization and industry specialization as the pattern of modern production and economic growth.Under the specific socio-economic environment in the UK, the swift industrial and business development drove the expansion of banking system and the emergence of a unified credit market that narrowed the credit spread among areas, and mitigated capital shortage in industrial areas. The first financial revolution, i.e. the rise of modern commercial banking system, provided massive fund support for the full-scale rise of the first industrial revolution. However, due to the weakness in risk management, rapid surge of bank credit accumulated massive risks in the financial system,which triggered frequent financial crises. After the financial crisis in 1825, the UK overhauled its financial system.The Bank of England gradually assumed central bank functions such as currency issuance, financial stability. The British financial industry entered into a century-long stable period thereafter.
During the second industrial revolution, the technological progress, economic expansion, and large-scale infrastructure building generated financing demands that stimulated the development of capital markets and investment bank business in the US. The second financial revolution, with the rise of modern investment banking system, restructured the capital foundation of the 2nd industrial revolution. The development of capital market provided the financial infrastructure and capital for large-scale industrial development. The M&A deals helped optimize industrial and market structures, and facilitated the transformation of scientific and technological achievements into economic growth. But in the early stage of development, due to lack of regulation, speculation was rampant in the US capital market, stock price manipulation, insider-trading, and frauds went unchecked. Stock market panic occurred frequently. After the Great Depression, the U.S. introduced multiple legislations, created regulatory agency and self-discipline organizations for the security markets, and established the separation of banking and investment bank businesses. Along with the gradual development of the financial market regulatory framework, the U.S. capital market entered into a regulated and recovery era.
In the process of the third industrial revolution, the United States, with a large weapons industry that expanded on orders from military forces of multiple countries, found it imperative to transform its economic institutions into civilian industries through rapid development of small or medium size enterprises.The existing financing pattern could not meet such needs in economic growth. The third financial revolution, with the emergence of venture capital investment system, created new driving forces for the 3rd industrial revolution. Venture capital not only provided direct financing for high-tech firms in their early stages, but also offered non-financial supports, including business consulting, strategic advice, resource network, and etc. In the relatively light-touch regulatory environment, capital flocked into the venture capital system and greatly eased the difficulty in financing for the startup technology firms. However, due to the focus on growth and lack of attention to risk management in the US regulatory system, the expansion in the financial industry also led to “irrational exuberance” from 1995 to 2001 and the burst of‘dot-com bubble’. As the Nasdaq was in its early stage and accounted for a limited share in U.S. capital market, the dot-com bubble caused limited damage on the economy. However, excessive risk-taking and lack of transparency of the venture capital system became more pronounced, the US regulatory authorities began to adjust rules on venture capital.In 2011, the SEC issued rules requiring venture capital funds to meet certain requirements, further tightening regulation of the venture capital system. In recent years, the speculation and pro-cyclical behaviors in venture capital investment became a topic of academic research.
The ongoing fourth industrial revolution is presenting historic opportunities for the financial industry. The integrated innovation of financial industry made possible by financial tecnology will become a feature of the fourth financial revolution. China is among the leading countries in financial technology development. We should learn from the past experience, and seek to balance development and security. With the progress of financial technology, the banking system, capital markets, venture capital system, and financial technology firms work together to support the real economy. At the same time, there should be measures to manage financial risks, to establish a dynamic and balanced financial regulatory system that is compatible with innovations in financial technology. Such a system will guide financial institutions to stick to the proper way and make innovation under the precondition of serving the real economy and complying with regulatory requirements, prevent disorderly capital expansion, and prevent systemic risks.
|
|
Received: 16 November 2020
Published: 02 February 2021
|
|
|
|
|
| [1] |
罗伯特·艾伦,《近代英国工业革命揭秘》,浙江大学出版社,2012年。
|
| [2] |
托马斯·S.阿什顿,《工业革命(1760—1830)》,上海人民出版社,2020年。
|
| [3] |
沃尔特·白芝浩,《伦巴第街》,中信出版社,2010年。
|
| [4] |
布罗代尔,《15至18世纪的物质文明、经济和资本主义》,三联书店,1993年。
|
| [5] |
蒂姆斯戴尔和霍特森,《1825年以来英国的金融危机》,上海财经大学出版社,2017年。
|
| [6] |
约翰·戈登,《伟大的博弈》,中信出版社,2005年。
|
| [7] |
W.H.B.考特,《简明英国经济史(1750年至1939年)》,商务印书馆,1992年。
|
| [8] |
金德尔伯格,《西欧金融史》,中国金融出版社,1991年,第111页。
|
| [9] |
祁斌,《资本市场发展的环境分析》,《今日财富(金融发展与监管)》, 2010, (3):11~20。
|
| [10] |
王章辉,《英国经济史》,北京:中国社会科学出版社,2013年,第169页。
|
| [11] |
夏德炎,《欧美经济史》,上海三联书店,1991 年。
|
| [12] |
徐滨,《一八二五年英国金融危机中的政府应对及制度变革》,《历史研究》,2017年第05期,第164~177页。
|
| [13] |
中国社会科学院经济研究所,《主要资本主义国家经济统计集(1848-1960)》,世界知识出版社,1962年。
|
| [14] |
Bernstein, Shai, Xavier Giroud, and Richard R. Townsend. 2016.“The Impact of Venture Capital Monitoring.” The Journal of Finance 71(4): 1591~1622.
|
| [15] |
Brunt, Liam. 2006. “Rediscovering Risk: Country Banks as Venture Capital Firms in the First Industrial Revolution.” Journal of Economic History, 74~102.
|
| [16] |
Brunt, Liam, and E. S. Cannon. 2009. “How Does Finance Generate Growth？ Evidence from the First Industrial Revolution.” Evidence from the First Industrial Revolution (February 15, 2009).
|
| [17] |
Crafts Nicholas, and Anthony Venables. 2003.“Globalization in History. A Geographical Perspective.” Globalization in Historical Perspective. University of Chicago Press, 323~370.
|
| [18] |
Fetter, Frank W. 1967. “A Historical Confusion in Bagehot's Lombard Street.” Economica, 80~83.
|
| [19] |
FSB.2020. BigTech Firms in Finance in Emerging Market and Developing Economies, October.
|
| [20] |
Gornall, W., and Strebulaev, I. A. 2015. The Economic Impact of Venture Capital: Evidence from Public Companies.
|
| [21] |
Howell, Sabrina T., et al. 2020. “Financial Distancing: How Venture Capital Follows the Economy Down and Curtails Innovation.” No. w27150. NBER working paper.
|
| [22] |
Lipson,E.,1947.The Economic History of England, Vol 2, London A. & C. Black,P9.
|
| [23] |
Ljungqvist, A., and Wilhelm Jr, W. J. 2003. IPO Pricing in the dot-com Bubble. The Journal of Finance, 58(2), 723~752.
|
| [24] |
OECD,2014.OECD Science,Technology and Industry Outlook. 2014.
|
|
|
|
